Credit Unions Have Mixed Responses to PPP Applications

As Congress and the Trump Administration reportedly close in on an agreement to infuse an additional $450 billion into the Paycheck Protection Program, credit unions are working with anxious small business members who did not get their loans approved during the first phase of the PPP.

However, because the SBA is not processing PPP loan applications, some credit unions have stopped accepting new applications from its small business members, at least for now. But even if the $450 billion in new funding is approved sometime this week, it won’t be enough to provide loans for all of the nation’s small businesses.

Last week the PPP ran out of its $349 billion that funded loans for an estimated 1.6 million small businesses, which accounts for only 5% of the 30.2 million small companies in the U.S. The national average PPP loan was $216,000, according to Lendio, a Lehi, Utah-based small business loan marketplace.

The bad news is that even if the additional $450 billion gets the green light this week, it means many small businesses will not get a loan.

“We estimate that it would take at least another $850 billion to help small businesses survive the health and economic crisis we’re all facing,” Lendio noted on its website. “Every day, we talk with hundreds of small business owners who are still waiting for relief funding. They’re stressed, anxious and frustrated. And to be honest, so are we.”

That stress, anxiety and frustration is evident among small business owners who are credit union members.

“I want you to know we understand the frustration you and the other business members in our community are experiencing, both in keeping your businesses operational and finding answers regarding the PPP loan,” Robert Gladu, AVP of Business Services for the $2.7 billion Canvas Credit Union in Lone Tree, Colo., said in a statement to its 4,000 small business owners.

The PPP rollout earlier this month came with a lot of confusion, delays and bad timing for lenders.

For example, the first set of the PPP’s draft rules were published shortly before the SBA directed small companies to apply for loans with banks and credit unions. Canvas said that put the credit union and other lenders on the spot because they lacked the necessary information to process the loans. Canvas said it did not receive its required login information for the SBA portal to submit applications until April 15, the day before the federal agency announced that the PPP fund had been exhausted.

To provide immediate relief to its small business members, Canvas deferred more than $150 million in loan payments.

“We are allowing [small business members] to defer payment on auto loans, credit card and overdraft lines of credits,” he said. “We’re helping the business owners themselves through consumer options as well. So we are doing everything that we possibly can outside of the assistance of the SBA to help our members and we’re getting great traction in that, and our members are really appreciating that. “

Scott Earl, president/CEO of the Mountain West Credit Union Association, said he has heard similar frustrations from many credit union members.

“Unfortunately, because the demand was so high, even once credit unions did go through the process, the majority [and now, all] of the funding was already gone,” Earl said.

State leagues, as well as CUNA and NAFCU, have been aggressively lobbying Congress to provide a second round of PPP funding for small businesses.

While waiting for the second round to be approved, some credit unions are not accepting any new applications.

According to its website on Monday, the $11.7 billion America First Credit Union in Riverdale, Utah said it will not accept any new PPP applications at this time because the SBA is not processing applications.

At the end of 2019, America First was listed as the only credit union on the top 100 list of the most active SBA 7 (a) lenders, according the federal agency.

America First noted it has already contacted some of its small business members to let them know that their loans have been approved by the SBA and that they will still receive those funds. For other small business owners, their loan applications are in the credit union’s queue and will be processed should additional funds be approved.

“We apologize for any frustration this rapidly changing SBA process has caused,” America First said in a statement. “We will continue to monitor the situation in Washington and hope to be able to help facilitate more PPP loans soon. We remain committed to helping you and your business and appreciate your patience as we navigate this unprecedented situation together.”

The $22 billion BECU in Tukwila, Wash., also has decided not to accept new PPP applications, according to its website.

“Business members who have submitted a PPP application will be contacted via email with an update as to the status or your loan,” BECU said in a statement. “Although we cannot make any assurances that any submitted applications will be approved, we intend to continue to process submitted applications in the hope that Congress allocates more funding to this program.”

The $111 billion Navy Federal Credit Union in Vienna, Va., said it will continue to accept applications from small business members in the hopes that more funding will be available soon.

“We understand small business owners are facing a lot of uncertainty right now, and we are here to assist with relief options for the unique situations they face,” Navy Federal said.